Only in these sick and twisted times can one advocate raising taxes as a step to bring about government austerity. In the wacky world of sovereign debt silliness we are all socialists! I’ve commented on the Greek bailouts once before but I need to do it again. It is just madness.
Greece has to raise existing taxes on tobacco, alcohol, property, etc., create new taxes, and bring about large-scale “privatization”, all to shrink its budget deficit. Why? To continue to qualify for the IMF, ECB, EU troika bailouts. Why is the Greek government receiving these bailouts in the first place? So that it will not default on its large sovereign debt. Why must it not be allowed to default on this debt? Because it is largely indebted to European banks and a Greek default might encourage default among the other “PIIGS”, such as Italy, Spain, Ireland or Portugal, countries that are also heavily indebted to the same banks. Why can’t the other “PIGGS” default, thus bankrupting these creditors? Because this would lead to a serious devaluation, if not collapse, of the Euro (not to mention bankruptcy of the politically well connected creditors). Why can’t the Euro be allowed to have a serious devaluation or collapse?
So, let’s address the premise then. Why exactly can’t the Euro collapse? Why can’t the PIIGS default? Why is Greece receiving this bailout under the condition that it impose austerity on its people?
What we are seeing now is an effort on the part of European governments and banks to keep unproductive, broke debtors solvent, so they can pay back their unproductive, broke creditors (be they private banks, central banks, or governments). European governments are administering this whole process to subsidize politically well-connected creditors before the overinflated, unbacked fiat currency system comes crashing down anyway. “Free market reforms” are being undertaken to help preserve a system that is exactly the opposite of what those reforms allege to achieve!
Austerity is not a top down process imposed from above by force. It takes place naturally as people realize they are spending beyond their means. Real austerity is saving and deferring of consumption. What we are witnessing in Greece is destruction of wealth. Wealth is destroyed in the rest of Europe to bail out Greece. At the same time the Greek state is giving away assets to which it has no right to in the first place through what pundits are calling “privatization”. The Greek people have every right to be upset. Greece needs genuine privatization (see here here and here) and deregulation, not what is presently taking place.
I have often heard people react with disdain to news coverage of the Greek protests claiming that the “lazy Greek protestors” aren’t willing to pay their taxes yet expect to receive all the cozy state benefits we constantly hear about. Yes, it is true, these state benefits will have to end, only to be replaced by a far more efficient free market. But right now there is no free market in sight. International creditors and the EU are gaining more power at the cost of the Greek state. A local tyranny is being replaced by a more distant, powerful one.
Next time you see the Greek protestors in the news ask yourself what they are protesting. Surely some oppose the austerity measures being imposed. Well, why are there austerity measures in the first place? Why is there a bailout? Ask yourselves these questions and the statist nature of this whole crisis becomes more clear.
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